It refers to a financial fund that aims at profit after financial derivatives such as financial futures and financial options are combined with financial instruments.
It is a form of investment fund, which means "the risk is hedge fund's".
The two most classic investment strategies of hedge funds are "short selling" and "leverage":
Short position:
That is, buying stocks as a short-term investment means selling short-term stocks first, and then buying them back when the stock price falls to earn an arbitrage. Almost all short sellers borrow other people's stocks to make short positions ("long position", which means buying their own stocks for long-term investment). It is most effective to take a short strategy in a bear market. If the stock market rises instead of falling, and short sellers bet in the wrong direction of the stock market, they must spend a lot of money to buy back the appreciated stocks and eat into losses. Short selling strategy is not adopted by ordinary investors because of its high risk.
Lending leverage:
"Leverage" has multiple meanings in financial circles. Its English word basically means "lever". Usually refers to expanding one's capital base through credit. Credit is the lifeblood and fuel of finance, and entering Wall Street (financing market) through "leverage" has a "symbiotic" relationship with hedge funds. In high-risk financial activities, "leverage" has become an opportunity for Wall Street to provide chips for big players. Hedge funds borrow money from big banks, while Wall Street provides services such as buying and selling bonds and backstage. In other words, hedge funds with bank loans will in turn invest a lot of money back to Wall Street in the form of commissions.